Tuesday, 24 May 2016

A New Era for Housing Policy?

Nat O'Connor: Now that there is to be a Minister of Housing, Planning and Local Government, as well as a Minister of State for Housing and Urban Renewal, one might hope for decisive shifts in housing policy.

The Fine Gael manifesto and the Programme for Government outline a range of commitments, including delivery of more social housing and affordable housing. Regardless of ideology, one might hope that the new ministers might wish to see a more coherent and honest housing strategy. At present, housing policy is neither.

Housing policy at present is incoherent because it fails to (physically) align housing with the needs of the economy and society.

There is no point arguing for utopia. A solution to Ireland’s housing has to deal with the facts on the ground, which include the following:
• The predominance of rural housing, and the low incidence of urban dwelling
• The under-occupation of housing
• Low population density and housing sprawl
• High car dependency and a disproportionately extensive road network
• Higher home energy costs associated with detached housing
• Higher costs to provide public transit to a dispersed population
• Higher costs to make public services such as hospitals and schools accessible to a dispersed population
• The socio-economic segregation of housing

All of these facts help explain why Ireland’s economy has inherent inefficiencies that make it weaker than it could be, not least in terms of regional imbalances.

Housing policy must join up policies across departments in order to ensure people can get to jobs, commerces and public services efficiently. That means joint policymaking with Finance (re taxation), Education and Skills (re school locations), Social Protection (re social welfare locations, including labour market activation services), Regional Development, Rural Affairs etc. (re rural living), Health (re hospital and Primary Care locations), Communications etc. (re energy infrastructure), Transport etc. (re roads and public transport) and Jobs etc. (re regional job development); and all of their associated agencies. In reality, every department probably has a major stake in the big policy questions about housing. And these dependencies across all of government go much deeper than for other policies.

Some coherent direction is required from government. What are the likely future balances between urban-rural, owner-rented, urban-suburban, car dependent-public transit, house-apartment, etc. going to be in Ireland? These are empirical questions first of all, with projections for the future based on a ‘policy at present’ scenario. Thereafter, one can raise the question of whether or not government policy should attempt to alter some of the trajectories. (Yes, it should!)

Discussion of housing policy at present is often dishonest because it pretends to be less interventionist than it really is. There is a fake distinction made between private housing and social housing, as if the state's role was only to influence the latter.

For example, Fahey and Norris (2009) outline the range of interventions in Ireland (see Table 2):
• Housing allowances*
• Social housing subsidies
• Tax relief on mortgage interest [currently being phased out]*
• No Capital Gains Tax on sale of owner occupied dwellings*
• No tax on imputed rent for owner occupiers*
• Lower VAT on new dwellings*
• Relatively low house purchase tax (stamp duty)*
• Control of social housing rents
• Stronger legal protection for social tenants than private renters
• Privatisation of social housing permitted*

In each case, there are countries in the EU that do something different from Ireland.

Other policies in Ireland include:
• Mortgage interest relief (75%) for landlords*
• Modest taxation of zoned land*
• Recent, temporary rent certainty measures*
• Various planning rules (including apartment size and quality)*
• Influence on bank mortgage lending*

All policies marked with an asterisk (*) affect markets for private housing.

Moreover, the scale of Rent Supplement (and other schemes, including Rental Allowance Scheme, leasing, etc.) make the state a dominant force in the rental market. Nearly half of private rental accommodation is effectively rented by the state through highly centralised systems, which decisively influence the private rental sector, with all sorts of negative consequences for low-income renters.

Many of these policies are inescapable. There need to be zoning rules. There need to be housing size standards, fire safety standards, etc. There have to be taxes on various aspects of the housing market. And because housing is the largest cost most households face, all of these policies have enormous effects on society and the economy. It is dishonest to imagine that the private sector housing market is operating in isolation from public policy. A great deal of housing development has occurred over the years due to tax breaks or other concessions being won from government.

Norris (2013) points to a range of policies that boosted home ownership in Ireland in what she calls ‘Ireland’s Socialised Home Ownership Regime’, including home owner grants, right to buy laws, grants to Public Utility Societies, local authority loans, tax reductions, etc.

Housing is also a major test of whether or not any government is willing to balance private profit with public benefit, especially for people on lower incomes.

Many of the housing interventions are biased towards people with wealth; and these have been reinforced by some programme for Government commitments, such as raising the threshold for Capital Gains Tax so that people with more expensive properties can pass even more tax-free wealth to their children.

Without a significant amount of tax revenue from housing it is hard to envisage how we can pay for major investments in social and affordable housing. With existing policies like tenant-purchase of social housing, we do not have enough publicly owned houses to maintain a social housing system and to reduce homelessness and the crisis of housing un-affordability.

What might a new era for housing look like? One could do worse than start with the ideas in the UN right to adequate housing as the criteria for a national housing strategy.

These call for, as a minimum:

  • Security of tenure: housing is not adequate if its occupants do not have a degree of tenure security which guarantees legal protection against forced evictions, harassment and other threats.
  • Availability of services, materials, facilities and infrastructure: housing is not adequate if its occupants do not have safe drinking water, adequate sanitation, energy for cooking, heating, lighting, food storage or refuse disposal.
  • Affordability: housing is not adequate if its cost threatens or compromises the occupants’ enjoyment of other human rights.
  • Habitability: housing is not adequate if it does not guarantee physical safety or provide adequate space, as well as protection against the cold, damp, heat, rain, wind, other threats to health and structural hazards.
  • Accessibility: housing is not adequate if the specific needs of disadvantaged and marginalized groups are not taken into account.
  • Location: housing is not adequate if it is cut off from employment opportunities, health-care services, schools, childcare centres and other social facilities, or if located in polluted or dangerous areas.
  • Cultural adequacy: housing is not adequate if it does not respect and take into account the expression of cultural identity.

What is in the programme for government is mostly focused on boosting supply. The risk is that there will be reduced regulation and tax breaks, all designed to encourage private development, but at the cost of economic efficiency and societal value. Demand might be boosted by making it easier for people to borrow larger sums of money, but that doesn't address affordability, and it certainly won't help the third of people on the lowest incomes who rely on rental accommodation, either from local authorities or from the private sector (with or without rental assistance like RS or RAS).

Yes, we need a much greater supply of housing. But not at any cost; and not if that means greater future costs or the continuation for another generation of all the inefficiencies in how housing has evolved to the present (influenced to a great extent by public policies across multiple departments).

Nat O'Connor is Lecturer in Public Policy and Public Management and member of the Institute for Research in Social Sciences, at Ulster University.

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